Off-Payroll Working in the Private Sector – CIPP/CIPD response
12 August 2018
The CIPP policy team together with the CIPD have submitted a joint response to HM Revenue & Customs and HM Treasury with the findings from their research into proposals that if developed will expand the reach of off-payroll working into the private sector.
To inform and evidence our response to this consultation, we published two joint surveys to our members and to the wider HR and payroll profession which ran throughout July and were specifically aimed at:
HR and payroll practitioners
HR and payroll contractors
In addition to the surveys, the following face-to-face events were held to gather anecdotal evidence and views directly:
CIPD together with IPSE held a workshop of HR/payroll and non-HR/payroll contractors to gain their insights about the off-payroll proposals
CIPP together with representatives from HMRC held a roundtable to gather views of HR and payroll practitioners
With thanks to all those who responded to our surveys and to those members who took part in these meetings.
Key findings from HR and payroll practitioners
- Over 69% of respondents currently employ the services of an individual/s via an intermediary such as a Personal Service Company
- 59% of respondents currently have limited or no responsibility for determining IR35 status and a further 64% have limited or no responsibility for making payments to contractors captured as a result of an IR35 determination
- 53% of respondents have little or no knowledge of the current rules of IR35 for contractors operating within the private and voluntary sectors
- 42% of respondents know a fair amount or know well about the impact and operation of IR35 within the public sector
- 79% of respondents don’t believe they have the capacity, knowledge or resources to deliver the preferred option in the Private and Third sectors
- Whilst 30% of respondents currently have yet to understand the impact that IR35 private sector reforms would have on them, 45% already know that they would need to expend resources to enlist the support of a third party organisation to assist in making an IR35 determination
- 91% of respondents believe that they will need some level of support from HMRC to determine status with only 9% believing that they would need no support at all from HMRC
- 69% of respondents will require written guidance and specialist knowledge from HMRC
- 55% of respondents believe that a phased delivery of any reform is necessary to ensure widespread awareness and understanding of the ultimate implications
- 82% of respondents have an expectation that contractor charges will increase and 86% have an expectation of increased ‘employer costs’ and workload (89%) as a result of reform (similar to that of the public sector) being rolled out to the Private and Third Sectors
Key findings from HR and payroll contractors
- 74% of contractor respondents who have used the Check Employment Status for Tax (CEST) tool believe it to be inaccurate
- 64% of contractor respondents anticipate needing professional advice as a result of any reform within the private and third sectors
- 69% of contractor respondents are not confident that their clients will have the capacity, knowledge or resources to be able to make a correct status determination
- 56% of contractor respondents plan to only seek contracts in the private and voluntary sectors in which the off-payroll rules do not apply
- 47% of contractor respondents believe that voluntary and charitable organisations will struggle to deliver IR35 reform with 44% believing that the Construction industry will also struggle significantly
Commenting on the joint response, Charles Cotton, senior CIPD adviser, performance and reward said:
“Based on what both payroll and HR practitioners and contractors have told us, the CIPD and CIPP strongly recommend that changes to the existing off-payroll working rules for engagements in the private sector will need to be implemented gradually to ensure that firms and the industry have enough time to amend their existing processes.”
In full agreement of the need to phase any changes in gradually and in recognition of the range of employer size and complexity within the Private Sector, Samantha Mann, CIPP senior policy and research officer highlighted:
“If the ‘preferred option’ is chosen then HMRC will share significant resource challenges to deliver knowledgeable customer service across all service lines together with information and materials that recognise the differing needs of the increased IR35 customer base.
Our findings also confirm that whilst the CEST tool is largely seen to be an improvement on its predecessor, before further reform is considered, thorough user evidence research together with a review of how CEST operates and ideally through public consultation, should be carried out so as to increase the number of reliable determinations”
The full consultation response can be found in the Policy hub under My CIPP on our website.